Deckers Brands’ Earnings Call Highlights Record Growth

Deckers Outdoor ((DECK)) has held its Q1 earnings call. Read on for the main highlights of the call.

Deckers Brands’ recent earnings call painted a generally positive picture, highlighting significant revenue and EPS growth driven by the record-breaking performance of both HOKA and UGG brands, particularly in international markets. Despite facing challenges such as a tough U.S. consumer environment, gross margin pressure, and potential tariff impacts, the overall sentiment was optimistic, with strong brand performance and market expansion overshadowing the hurdles.

Record Quarterly Revenue for HOKA

HOKA delivered its largest quarter in history, with global revenue surging by 20% year-over-year to reach $653 million. This remarkable achievement underscores the brand’s growing popularity and market penetration, contributing significantly to Deckers’ overall financial success.

Strong Performance in International Markets

Deckers’ international revenue saw a substantial increase of 50%, driven by significant growth in both HOKA and UGG brands. This expansion highlights the company’s successful global strategy and its ability to capture new markets, further strengthening its international presence.

UGG’s Largest June Quarter

UGG achieved its largest June quarter, with global revenue increasing by 19% year-over-year to $265 million. This growth reflects the brand’s enduring appeal and effective market strategies, contributing to the company’s robust financial performance.

Overall Revenue and EPS Growth

Deckers reported an overall revenue growth of 17% year-over-year, reaching $965 million, while diluted earnings per share increased by 24% to $0.93. These figures highlight the company’s strong financial health and operational efficiency.

Successful Wholesale Channel Expansion

The wholesale channel emerged as a primary growth driver for both HOKA and UGG, with strong sell-through rates reported. This success underscores the effectiveness of Deckers’ distribution strategies and its ability to meet consumer demand.

Challenging U.S. Consumer Environment

Despite international success, Deckers faced a challenging consumer environment in the U.S., impacting HOKA’s domestic performance. This highlights the need for strategic adjustments to navigate the fluctuating U.S. market conditions.

Gross Margin Decline

Deckers experienced a gross margin decline of 110 basis points to 55.8%, attributed to an unfavorable channel mix, increased promotions, and higher freight rates. This decline indicates areas where the company needs to focus on cost management and operational efficiency.

Inventory and Tariff Concerns

Inventory levels increased by 13% year-over-year, and potential tariffs pose a risk of $185 million in unmitigated costs. These concerns highlight the importance of strategic planning and risk management in the face of macroeconomic uncertainties.

Forward-Looking Guidance

During the earnings call, Deckers provided an upbeat guidance, reflecting a strong start to the fiscal year. The company reported a 17% increase in revenue to $965 million and a 24% rise in diluted earnings per share to $0.93. With HOKA and UGG brands outperforming expectations, Deckers anticipates continued growth, particularly in international markets. The company remains committed to strategic investments and operational discipline to navigate macroeconomic uncertainties, with a focus on innovation and consumer experience.

In summary, Deckers Brands’ earnings call highlighted a positive outlook, driven by record performances from HOKA and UGG brands, especially in international markets. Despite challenges in the U.S. market and margin pressures, the company remains optimistic about future growth, supported by strategic investments and a focus on innovation. Investors and market watchers will be keen to see how Deckers navigates the challenges and capitalizes on its growth opportunities in the coming quarters.